The most controversial sections of the Republican reconciliation bill, on tax and health, have arrived in the Senate, sharing broad outlines with the House-passed One Big, Beautiful Bill Act (OBBBA, H.R. 1) but also significant differences, including on Inflation Reduction Act (IRA) energy tax credit modifications, international tax proposals, and by retaining the current policy $10,000 state and local tax (SALT) deduction cap instead of the $40,000 cap in the House bill. Both include permanence for main Tax Cuts & Jobs Act (TCJA) individual provisions expiring at the end of 2025, but the Senate bill also makes permanent the TCJA pre-cliffs — on bonus depreciation, IRC Section 163(j) interest deductibility, and IRC Section 174 R&D expensing — and increased amounts for the standard deduction and Child Tax Credit. Whether a Senate bill can be taken up and passed by the House, as-is, remains unclear.

Senate Majority Leader John Thune (R-SD) and other leaders plan to spend this week negotiating changes to the bill before planned floor consideration and a vote next week (week of June 23), with Republicans able to lose the votes of only three of their members to pass the bill in the Senate. Politico Playbook reported this morning that Leader Thune "is hoping to take a first vote on the GOP megabill by next Wednesday or Thursday, setting up a vote on the final package over the following weekend." The report also cited comments by Senator Ron Johnson (R-WI) — a longtime detractor of the bill over fiscal concerns whose tone has become more supportive in recent weeks — as saying a vote next week could fail, possibly suggesting it could take more time for a final Senate version to be developed. "Our plan is to try releasing something at the beginning of next week, and start the process of getting the vote-a-rama and everything set up by the end of next week," Senator Markwayne Mullin (R-OK) said in a Semafor report this morning.

Initial reactions to the bill from other Republican Senators, many of whom were first briefed about the long-awaited Senate Finance Committee plan on Monday, indicated that socializing the bill among members and gaining sufficient support prior to a floor vote could be a formidable task and may take longer than planned. "This is just the opening shot," said Senator John Cornyn (R-TX) in a Bloomberg report, suggesting changes could be in store. Senator Josh Hawley (R-MO), who has been outspoken against major Medicaid changes and is concerned about the Senate bill's targeting of the provider tax, said, "This bill needs a lot of work."

Senate Republicans did have the benefit of the House bill having been out for weeks to gauge how best to tailor their proposal to members and stakeholders. Many provisions mirror those in the House bill, including Trump accounts for children. Senate Finance Committee Chairman Mike Crapo (R-ID) confirmed that the bill will not be marked up in committee, meaning there will be a more leadership-driven effort to modify the bill to satisfy both Republican Senators and possibly House members, given the goal of having the House approve the eventual Senate bill without further deliberation. Punchbowl News reported June 17, "Senate GOP leaders desperately want to work out problems with the House now to avoid a formal conference. But they also need to sell their own senators." Chairman Crapo said in the report, "Certainly everything that we've put out is out there for consideration, and we'll see how people react to it."

Tax Notes reported on Senators' expectations that the bill will change before a vote in their chamber: "This is a proposal; nothing is finalized," Sen. Mullin said in the report. "Everything is on the table. We're working through every aspect. There isn't any finalized text yet … We're going through everything to make sure we can get 51 votes." Sen. Lisa Murkowski (R-AK), who previously wrote to Leader Thune cautioning against repeals of IRA clean energy credits, said she expects changes to the bill. "I don't think it's going to stay in this form," Murkowski said.

The expectation that the bill will be changed complicates the Republican target for enactment by July 4. "We're going to be working over the course of the next week to get it through all the Byrd bath tests that we have to go through in the Senate and have a bill on the floor that we can start voting on sometime next week," Leader Thune said on Fox News June 17, referring to rules that set revenue parameters for reconciliation bills. Punchbowl News reported June 18 that Vice President JD Vance said during the Tuesday policy lunch that the Administration wants the bill completed by the August recess. The report said the Finance Committee Byrd Bath review may start later this week and maybe go into next week, with Democrats set to challenge provisions including the current policy baseline that that does not take into account the cost of the TCJA extensions.

One issue clearly still under deliberation is the SALT cap, with some House Republican members representing New York indicating the bill will not win their votes when it is back in the House without retaining the $40,000 cap. Leader Thune and others suggested the SALT issue is open for negotiation with the goal of settling on a mutually agreeable proposal, despite the fact that no Senate Republicans represent states where the cap is a major issue.

Both the House and Senate bills terminate many IRA energy tax credits after the end of the year. The Senate version does allow solar and wind to qualify for clean electricity credits in 2026 and 2027. Politico reported, "Senate Republicans are extending some of the House's aggressive phase-out dates for credits benefitting 'baseload' energy technologies like nuclear, geothermal and hydropower, leaving one GOP proponent of the incentives, Sen. Thom Tillis [R-NC], 'generally satisfied.'" Senator Shelley Moore Capito (R-WV) and others are reportedly working to extend the phaseout period for the hydrogen credit past 2025.

Among the robust set of international tax changes, the rates for main TCJA provisions — global intangible low-taxed income (GILTI) and Foreign-derived intangible income (FDII) deductions, and base erosion and anti-abuse tax (BEAT) — would all be set at 14%, QBAI would be eliminated for GILTI and FDII, and expense allocation for GILTI would be limited. "Net CFC Tested Income" would be the new name for GILTI — some Republicans were said to have long objected to the current name — and FDII would be redesignated "Foreign-Derived Deduction Eligible Income." The Section 899 retaliatory tax increase is 5 percentage points per year up to 15 percentage points, and it would be delayed until 2027.

A Wall Street Journal editorial was generally supportive of the Senate tax provisions aside from the approach to solar and wind and said: "Senate Finance regrettably left out the House's expansion of health-savings accounts and other measures aimed at expanding private insurance options. This is odd since their estimated cost in lost revenue is small. Senators can still improve the tax bill before it goes to the floor, and we hope they do."

Today (Wednesday, June 18) at 4 p.m. is the EY Webcast, "How the Senate Finance Committee revisions shape what's next for the reconciliation bill."

Tax — Senate Finance Committee Ranking Member Ron Wyden (D-OR) introduced two bills that update his partnership discussion draft released in 2021: S. 2094, to modify the partnership rules for taxation of basis-shifting transactions involving related parties, and S. 2095, to improve the rules related to partners and partnerships.

Cryptocurrency — By a vote of 68-30, with the support of 18 Democrats, the Senate today (Tuesday, June 17) passed a landmark bill (S. 1582) regulating a type of cryptocurrency called stablecoins, which are designed to match the value of another stable asset such as the U.S. dollar. The coins are often used to facilitate trades of other, more volatile digital assets such as Bitcoin. The "GENIUS Act" (for Guiding and Establishing National Innovation for U.S. Stablecoins) is sponsored by Senator Bill Hagerty (R-TN), with several original cosponsors including Banking Committee Chairman Tim Scott (R-SC), and Senators Cynthia Lummis (R-WY), Angela Alsobrooks (D-MD) and others. The bill's passage represented the first time the Senate has passed a bill related to cryptocurrency regulation.